Econ201--chapter8 - Chapter 8 Notes: Firm Decision Marking...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 8 Notes:  Firm Decision Marking and Long run  supply - Production Function:  the relationship between the quantity of inputs a firm uses  and the quantity of output it produces. o A firms production functions underlies its cost curves. - Fixed Input:  an input whose quantity is fixed and cannot be varied - Variable input:  an input whose quantity the firm can vary - Long run:  time period in which all inputs can be varied - Short run:  time period in which at least one input is fixed The relationship between the quantity of labor and the  quantity of output, for a given amount of the fixed input,  constitutes the farm’s production function - Total Product Curve:  shows how the quantity of output depends on the quantity  of the variable input, for a given quantity of the fixed input. Flattening of total product curve is also due to diminishing returns  to inputs in production: the marginal product of an input falls as  more of that input is used if the quantities of other inputs are fixed. - Marginal Product:  The additional quantity of output that is produced by using  one more unit of that input. o Marginal product of labor = change in the quantity of output (the rise)  divided by  the change in the quantity of labor (the run) which = change in  quantity of output generated by one additional unit of labor   In this case, the marginal product of labors falls as the number of  workers increase. That is, there are  diminishing returns to labor  on  George and Martha’s Farm. -
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/09/2008 for the course EC 201 taught by Professor Online during the Winter '07 term at University of Oregon.

Page1 / 4

Econ201--chapter8 - Chapter 8 Notes: Firm Decision Marking...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online